Sri P Narayana Reddy., Visakhapatnam V. The ITO, Ward-4(2)., Visakhapatnam

ITA 65/VIZ/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56806 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 4 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 28-04-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 20-03-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: D KOMALI KRISHNA
• Keywords: Unexplained investment

Judgement Text

ITA NOS. 64 65 AND 463 P NARAYANA REDDY VISAKHAPATN AM PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NOS.64 & 65 /VIZAG/2007 ASSESSMENT YEAR: 2003 - 04 P. NARAYANA REDDY, VISAKHAPATNAM VS. ITO WARD-4(2) VISAKHAPATNAM (APPELLANT) PAN NO: AJMPP 4978 Q (RESPONDENT) ITA NO.463/VIZAG/2008 ASSESSMENT YEAR:2003-04 ITO WARD-4(2) VISAKHAPATNAM VS. SMT. P. KAMALA, L/R OF SHRI P. NARAYANA REDDY, VISAKHAPATNAM (APPELLANT) (RESPONDENT) PAN NO: AJMPP 4978 Q APPELLANT BY: SMT. D. KOMALI KRISHNA, SR.DR RESPONDENT BY: NONE DATE OF HEARING: 04-08-2011 DATE OF PRONOUNCEMENT: 23-08-2011 ORDER PER SHRI B.R. BASKARAN, ACCOUNTANT MEMBER: THE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS PASSED BY LD CIT (A)-II VISAKHAPATNAM AND THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD CIT(A)- I VISAKHAPATNAM. 2. IT HAS BEEN REPORTED BY THE DEPARTMENT THAT THE A SSESSEE HAS EXPIRED IN THE MONTH OF AUGUST, 2010 AND ACCORDINGLY THE REVEN UE HAS FILED THE REVISED FORM NO.36 BY BRINGING THE WIFE OF THE DECEASED ASS ESSEE SMT. P. KAMALA AS ITA NOS. 64 65 AND 463 P NARAYANA REDDY VISAKHAPATN AM PAGE 2 OF 6 LEGAL REPRESENTATIVE ON RECORD. HOWEVER, IN THE APP EALS FILED BY THE ASSESSEE, THE LEGAL HEIRS OF THE DECEASED ASSESSEE WERE NOT B ROUGHT ON RECORD. THOUGH THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE WAS A DVISED SEVERAL TIMES TO BRING THE LEGAL REPRESENTATIVES ON RECORD, NO ACTION WAS TAKEN FROM THE ASSESSEES SIDE IN THIS REGARD. IT MAY BE NOTED THAT THE APPEALS WE RE ADJOURNED ON SEVERAL OCCASIONS SPECIFICALLY FOR THIS PURPOSE. DESPITE G IVING SEVERAL OPPORTUNITIES, NONE APPEARED ON BEHALF OF THE ASSESSEE ON THE DATE OF H EARING. SINCE THE LEGAL REPRESENTATIVES HAVE NOT BEEN BROUGHT ON RECORD IN THE APPEALS FILED BY THE ASSESSEE, WE DISMISS THEM IN LIMINE, AS UN-ADMITTED . WE PROCEED TO DISPOSE OF THE APPEAL FILED BY THE REVENUE EX-PARTE, QUA THE A SSESSEE. 3. THE SOLITARY ISSUE URGED IN THE APPEAL OF THE RE VENUE RELATES TO DELETION OF THE VALUE OF EXCESS STOCK ADDED BY THE ASSESSING OF FICER. 4. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS ENGAGED IN THE JEWELLERY BUSINESS. A SURVEY OPERATION U/S 1 33A WAS CONDUCTED IN THE BUSINESS PREMISES OF THE ASSESSEE ON 30.08.2002. DU RING THE COURSE OF SURVEY OPERATION, PHYSICAL INVENTORY OF SILVER AND GOLD WE RE TAKEN AND THE DETAILS OF THE SAME ARE FURNISHED BELOW: GOLD SILVER GOPALAPATNAM SHOP NO.1 3682KGS 0.00KGS GOPALAPATNAM SHOP NO.2 0.00 KGS 142.462KGS NAD KOTHA ROAD SHOP 0.069KGS 22.318KGS PENDURTHY SHOP 1.825KGS 80.971KGS TOTAL 5.576KGS 245.751KGS =============== BASED UPON THE EXPLANATIONS AND EVIDENCES PRODUCED IN COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER REDUC ED 1.707 KGS OF GOLD COMPRISING OF PERSONAL GOLD OF THE APPELLANT, CUSTO MERS GOLD, STONE WEIGHT/ IMPURITIES FROM THE STOCK OF GOLD FOUND AS ABOVE AN D 24.547 KGS OF SILVER TOWARDS IMPURITIES FROM THE STOCK OF SILVER FOUND A S ABOVE. THUS, THE ASSESSING ITA NOS. 64 65 AND 463 P NARAYANA REDDY VISAKHAPATN AM PAGE 3 OF 6 OFFICER ARRIVED AT THE PHYSICAL STOCK BELONGING TO THE BUSINESS AS 3.869 KGS OF GOLD AND 221.176 KGS OF SILVER. AS AGAINST THE ABOV E, THE STOCK OF GOLD AND SILVER AS PER THE STOCK REGISTER WAS 2.17 KGS AND 132.97 K GS RESPECTIVELY. THUS, HE ARRIVED AT THE EXCESS STOCK OF GOLD OF 1.699 KG, WI TH THE VALUE OF ` 8,79,500/- AND EXCESS STOCK OF SILVER OF 88.199 KG, WITH THE VALUE OF `6,32,681/-. THUS, THE VALUE OF THE EXCESS STOCK OF GOLD AND SILVER WAS AR RIVED AT `15,12,181/- WHICH WAS TREATED AS THE UNEXPLAINED INVESTMENT OF THE AP PELLANT. IN THIS CONTEXT, THE ASSESSING OFFICER REJECTED THE EXPLANATION OF THE A PPELLANT TO THE EFFECT THAT THE STOCK FOUND IN THE PENDURTHY SHOP DIDNT BELONG TO HIM BUT IT BELONG TO SRI M. VENKATA REDDY, WHO WAS THE NEPHEW OF THE APPELLANT. HE REJECTED THE SAID EXPLANATION FOR THE FOLLOWING REASONS: (I) IN COURSE OF THE SURVEY, WHEN STATEMENT WAS RECORDED FROM THE APPELLANT, HE ACCEPTED THAT THE SHOP AT PENDURTHY BELONGED TO HIM. (II) THE SHOP AT PENDURTHY WAS REGISTERED WITH THE SALES TAX AUTHORITIES IN THE NAME OF SRI M. VENKATA REDDY ONLY AFTER THE DATE OF SURVEY. THE SAME WAS REGISTE RED ON 09-07-2004 WHICH WAS ONE YEAR TEN MONTHS FROM THE DATE OF SURVEY. THEREFORE, THE SAID ACTION WAS AN AFTER THOUGHT ONLY. (III) SRI M. VENKATA REDDY WAS NOT AN INCOME TAX ASSESSEE AS ON THE DATE OF SURVEY AND HE FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2002-03 ON 28-03- 2003 I.E. AFTER A GAP OF SIX MONTHS FROM THE DATE O F SURVEY. (IV) THE PROVISIONS OF SEC.64(1)(VIII) OF THE ACT ARE APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE. AGGRIEVED THE ASSESSEE CARRIED THE MATTER BEFORE TH E LD CIT (A) AND GOT RELIEF. HENCE THE REVENUE IS IN APPEAL BEFORE US. 5. WE HEARD THE LD DEPARTMENTAL REPRESENTATIVE AND PERUSED THE RECORD. THOUGH THE ASSESSEE INITIALLY CLAIMED DURING THE CO URSE OF SURVEY THAT PENDURTHY ITA NOS. 64 65 AND 463 P NARAYANA REDDY VISAKHAPATN AM PAGE 4 OF 6 SHOP ALSO BELONGS TO HIM, WE NOTICE THAT, SUBSEQUEN TLY THE ASSESSEE HAS FILED EVIDENCES TO SHOW THAT THE SAID SHOP ACTUALLY BELON GS TO HIS NEPHEW SHRI M. VENKATA REDDY. ACCORDINGLY, HE HAS RETRACTED FROM T HE STATEMENT INITIALLY GIVEN BY HIM DURING THE COURSE OF SURVEY WITH THE REASON THAT HE WAS IN A CONFUSED STATE OF MIND BECAUSE OF THE SURVEY. IN SUPPORT OF T HE CONTENTION THAT THE PENDURTHY SHOP ACTUALLY BELONGED TO HIS NEPHEW SHRI M. VENKATA REDDY, THE ASSESSEE FILED SALES TAX REGISTRATION OBTAINED BY T HE SAID PERSON AND THE INCOME TAX RETURNS FILED BY HIM. THESE EVIDENCES WERE DULY CONSIDERED BY THE LD CIT (A) WHILE DELETING THE IMPUGNED ADDITION. THE RELEVANT OBSERVATIONS MADE BY THE LEARNED CIT(A) ARE EXTRACTED BELOW: 5.2.3. THE NEXT ISSUE THAT NEEDS EXAMINATION IS WHE THER THE MATERIALS AND EVIDENCES PRODUCED BY THE APPELLANT I N SUPPORT OF THE CLAIM THAT THE PENDURTHY SHOP BELONGED TO SR I M. VENKATA REDDY ARE RELEVANT OR NOT. THE APPELLANT PR ODUCED THE CERTIFICATE OF REGISTRATION ISSUED IN FAVOUR OF SRI M. VENKATA REDDY BY THE COMMERCIAL TAX DEPARTMENT. THE RELEVAN CE OF THE SAID CERTIFICATE WAS REJECTED BY THE ASSESSING OFFICER ON THE GROUND THAT THE SAME WAS OBTAINED ON 09-07-2004 WHICH WAS SUBSEQUENT TO THE SURVEY AND THEREFORE AN AFTER THOUGHT ONLY. HOWEVER, CAREFUL EXAMINATION OF THE SAID CERT IFICATE OF REGISTRATION ISSUED BY THE COMMERCIAL TAXES DEPARTM ENT, IT IS NOTICED THAT IT WAS ORIGINALLY ISSUED ON 22-08-2002 BY THE ASSTT. COMMERCIAL TAX OFFICER, PENDURTHY. THE SAID CERTIFICATE WAS HAVING THE REGISTRATION NUMBER OF VSP/03/3/3168 /2002- 03. SUBSEQUENTLY, DUE TO CHANGE OF JURISDICTION, A FRESH REGISTRATION NUMBER I.E. VSP/04/2/4652 WAS ALLOTTED BY THE ASST. COMMERCIAL TAX OFFICER, GAJUWAKA W.E.F. 08-07 -2004 ON 09-07-2004. ALL THESE FACTS ARE MENTIONED IN THE BO DY OF THE SAID CERTIFICATE. THE FACT THERE WAS CHANGE OF JURI SDICTION FROM COMMERCIAL TAX OFFICER, PENDURTHY TO GAJUWAKA IS FU RTHER EVIDENT FROM THE LETTER OF THE ASST. COMMERCIAL TAX OFFICER, GAJUWAKA DT. 23-03-2007 WHICH WAS ADDRESSED TO SUB- POSTMASTER, BUTCHIRAJUPALEM, VISAKHAPATNAM IN WHICH A REQUEST WAS MADE TO RELEASE THE NSCS OF THE VALUE O F `2,000/- DEPOSITED TOWARDS SECURITY OF SRI M. VENKATA REDDY. IN THE SAID LETTER, THE FACT RELATING TO THE CHANGE OF JURISDICTION IS CLEARLY MENTIONED. THEREFORE, THE A SSESSING ITA NOS. 64 65 AND 463 P NARAYANA REDDY VISAKHAPATN AM PAGE 5 OF 6 OFFICER IS WHOLLY INCORRECT IN STATING THAT THE SAL ES TAX REGISTRATION WAS DONE ON 09-07-2004 WHICH WAS SUBSE QUENT TO THE SURVEY. THE FACT AS REVEALED FROM THE SAID R EGISTRATION CERTIFICATE IS THAT IT WAS REGISTERED ON 22-08-2002 WHICH WAS PRIOR TO THE DATE OF SURVEY. THE SALES TAX ASSESSME NT ORDERS FOR THE YEARS 2002-03, 2003-04 & 2004-05 CLEARLY RE VEAL THAT THE PENDURTHY SHOP WAS ASSESSED FOR SALES TAX PURPO SES AS A PROPRIETARY CONCERN OF SRI M. VENKATA REDDY. IT IS A LSO NOTED THAT SRI M. VENKATA REDDY LEASED THE SHOP PREMISES FROM SMT. V. MAHESWARI AND SMT. V. RAMANAMMA VIDE LEASE DEED DT. 15-07-2002. FURTHER, THE APPELLANT RELIED UPON THE INCOME TAX RETURN FILED BY SRI M. VENKATA REDDY FOR THE AS SESSMENT YEAR 2003-04. AS STATED EARLIER, THE REGISTRATION U NDER THE COMMERCIAL TAX WAS DONE ON 22-08-2002 AND THEREFORE , THE SAME HAS TO BE TAKEN AS THE DATE OF COMMENCEMENT OF THE BUSINESS BY SRI M. VENKATA REDDY. THEREFORE, THE FI RST FINANCIAL YEAR FOR WHICH BUSINESS WAS CARRIED ON BY SRI REDDY WAS FINANCIAL YEAR 2002-03 RELEVANT TO THE ASSESSME NT YEAR 2003-04. THE DUE DATE FOR FILING THE RETURN OF INCO ME FOR THE ASSESSMENT YEAR 2003-04 WAS 31 ST JULY, 2003. AS AGAINST THIS, THE SRI REDDY FILED RETURN OF INCOME ON 11-08-2003 WHEREIN THE ENTIRE TRANSACTIONS OF PENDURTHY SHOP WAS REFLE CTED. THEREFORE, THE ASSESSING OFFICERS CONTENTION THAT THE RETURN WAS FILED SUBSEQUENT TO SURVEY HAS NO RELEVANCE. SR I M. VENKATA REDDY HAS FILED THE RETURN OF INCOME ON THE BASIS OF COMMENCEMENT OF THE BUSINESS IN THE FINANCIAL YEAR 2002-03 RELEVANT TO THE ASSESSMENT YEAR 2003-04. THUS, IT C OULD BE SEEN THAT THE EVIDENCES FURNISHED BY THE APPELLANT IN SUPPORT OF THE CONTENTION THAT THE SAID SHOP AT PENDURTHY B ELONG TO SRI M. VENKATA REDDY IS ADEQUATE, COGENT AND SUFFICIENT . THEREFORE, THE STOCK OF PENDURTHY CANNOT BE TAKEN A S THE STOCK OF THE APPELLANT AND AS STATED EARLIER, IF TH AT IS EXCLUDED, THERE WOULD BE NO EXCESS STOCK IN THE HANDS OF THE APPELLANT. HENCE, THE ADDITION OF ` 15,12,181/- MADE IN THIS REGARD TOWARDS THE VALUE OF THE UNEXPLAINED STOCK IS HEREB Y DELETED AND THIS GROUND OF APPEAL IS ALLOWED . 6. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD CIT (A), WE NOTICE THAT THE FIRST APPELLATE AUTHORITY HAS RENDERED THE DECISION ON TH E IMPUGNED ISSUE, AFTER DULY ITA NOS. 64 65 AND 463 P NARAYANA REDDY VISAKHAPATN AM PAGE 6 OF 6 CONSIDERING VARIOUS ASPECTS SURROUNDING THE SAID IS SUE. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN HIS ORDER ON THIS ISSUE. 7. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE A S WELL AS THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 23 RD AUGUST, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PVV/SPS VISAKHAPATNAM, DATE:23-08-2011 COPY TO 1 SHRI P. NARAYANA REDDY C/O SHRI C. SUBRAHMANYAM, CA, 102 LAXMI APARTMENTS, FACOR LAYOUT, WALTAIR UPLANDS, VISAKHAP ATNAM 2 3 THE ITO WARD-4(2) VISAKHAPATNAM SMT. P. KAMALA, L/R SHRI P. NARAYANA REDDY C/O SHRI C. SUBRAHMANYAM, CA, 102 LAXMI APARTMENTS, FACOR LAYOU T, WALTAIR UPLANDS, VISAKHAPATNAM 4 5. THE CIT II VISAKHAPATNAM THE CIT(A)-II VISAKHAPATNAM 6 THE DR, ITAT, VISAKHAPATNAM. 7 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM